Signature Assignment: Accounting Presentation
Accounting2018
Week2Presentation-AppleInc.Company.pptxAPPLE INC. COMPANY
Week 2 Presentation – Apple Inc. Company
RaJeanne Veal
ACC/422 - Professor Brian Lichau
July 23, 2018
Company's Cash Balance
2017 - $ 19,147 Million
2016 - $ 19,376 Million
The company have experienced decrease in its cash balances because of several reasons.
First the company had a decrease in sale which led to reduction if the revenue they generated.
Secondly the firm used most of its cash to meet its expansionary desires with the intention of satisfying the needs of most of her customers
The decrease in cash might also be as a result of increased product promotion in order to keep up with the ever increasing competition in the market.
With all the adjustment in the market the firm have to spend more cash to attract her customers and pay the employees n order to remain competitive in the technology market.
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Company's Accounts Receivable
2017 - $ 35,673 Million
2016 - $ 29,299 Million
Cash and Cash Equivalents
Cash and cash equivalent is discussed in note one.
The cash and cash equivalent of the company has been on the rise for the last two years.
By the end of the year 2017 the cash and cash equivalent was valued at $27,491.00 Million
In 2018 march the total of the cash and the cash equivalent had risen to $45,059 Million
Cash and cash equivalents are items that can easily be converted into money and be used in transacting activities within the firm. There are several reasons that can cause the increase of cash and cash equivalent to a firm. For the case of the apple company, the increase can be attributed to the sale of bonds were previously bought. The sale of bonds brought good amount of money to the company. Secondly, the firm also have competitive advantage over other firms in the market thus generating more cash from its transactions. Other cash were also generated through the shareholders with the aim of expanding the business to reach more customers.
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Accounts Receivable
Accounts receivable is the second item always discussed in the cash flow.
Accounts receivable are considered to be current assets because the firm expects to get them within a short period of time.
When the accounts receivables are high, it is an indication that the firm is doing poorly in collecting her debts.
High amount of accounts receivable may lead to failure of the firm to meet some of its obligations.
Accounting policy requires that the receivables are collected as soon as possible to help the firm run its operations effectively.
Accounts Receivable cont.
The company offers discounts for customers who pays their debts within 30 days so as to encourage clients to pay their debts faster.
The firm also uses regular reminders so that the debtors can be aware of their pending debts and complete the payments within the agreed period.
The policy of the company is that debt payment within the first 15 days get a discount of 10% then 5% for the clients who pays their debts within 30 days.
In addition to the incentives the pending debts attract 10% penalty till all the amount is cleared.
Allowance for doubtful accounts
The allowance for doubtful accounts are amounts which are calculated based on the accounts receivable which the firm do not expect to collect because of one reason or the other.
At times the firm fails to collect it debts because the customers cannot be traced or the customer has been declared bankrupt.
The account is used to record bad debts and it reduces the accounts receivable by the firm.
Apple had $ 58 million and $ 53 million as allowance for doubtful account in 2017 and 201 6 respectively.
Allowance as a percentage of accounts receivable, gross is calculated by dividing the Allowance for doubtful accounts by gross receivable multiplied by 100%
The allowance for doubtful accounts help the firm to determine its exact amount receivable. The firm need to strengthen its policies so as to reduce the allowances for doubtful accounts. Close monitoring of the customers will ensure that collection of debt is maximized for the benefit of the company
The increase in the allowances for doubtful accounts affects the cash flow and the liquidity of the firm by shrinking the cash and cash equivalents of the organization.
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Company's Inventory Balance
2017 - $ 4,624 Million
2016 - $ 4,716 Million
The inventories have been in a decreasing trend
The inventories of the apple company has been in a decreasing trend for the past two years as shown above. The reason for the decrease of the inventories is because the firm has lowered the amount of goods it is buying because of the decrease in sales. The second reason for the decrease is because of the decrease in the work in progress and the finished products. The decrease of the inventory might not signal a positive trend to the firm but a general decrease in the operations of the firm. The company need to invest more in its operations so that it can outwit her customers in the market.
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Company's Policies for Reporting Inventory
The policy of the company for the inventories is to ensure that all the properties of the firm are used for the intended purposes without pilferage or theft.
The company maintains complete and accurate record of its inventories at every stage.
The company has well trained and honesty employees who keep record of all the inventories of the organization.
Inventories have four document for reporting.
The first report comes from the purchasing requisition to the purchasing officer.
The second document is purchase order which indicates the items which have been ordered for
An invoice is then received from the supplier indicating the items that have been ordered for
The last document is the receiving report to very the items received from the supplier.
Proper reporting ensures that the firm benefit from the inventory it has and the ones bought. A disciplinary action is often taken on an employee who has violated the process with an intention to steal from the company.
When the document are recorded the details of the sender and the receiver are indicated for verification in case need arises.
There are four reason for internal control structure. The first is to protect the inventory against misuse and theft. The second is to ensure that all the stakeholder within the firm comply with the laws and regulations of business. The third is to determine the ability of each worker and the last is to have the records for financial purposes
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AR Turnover
Accounts receivable turnover ration = net credit sales/ average accounts receivables
2017
Average= (17,874 + 15,754)/2 = 16,814
Turnover = 107,778/ 16,814 = 6.41
2016
Average = (15,754 + 16,849)/2 = 16,302
Turn over 119,168/16,302
The turnover is calculated by getting net sales for the period then divided by the average accounts receivables
Average accounts receivable is the opening balance plus the closing balance divided by two
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Days Outstanding for Receivable
Days Outstanding for Receivable = accounts receivable/ sales per day
2017
Days Outstanding for Receivable = 35,673 million/ (107,778/365)
35,673/295.3 = 120.8
2016
Days Outstanding for Receivable = 29,299 million/ (119,168/365)
29,299 = 120.5 million = 243.1
Days outstanding is gotten by dividing the accounts receivable by sales per day.
Sales per day is the average of the sales for the 365 days which is the accounting period.
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Compute the Inventory turnover and Days Sales in Inventory.
Turnover = cost of sales/average inventory
= 141,702/4670 = 30.3 (2017)
= 131,506/4848 = 27.1 (2016)
Day sales in inventory = turn over X 365
30.3 X 365 = 11,060 days (2017)
27.1 X 365 = 9,892 days (2016)
References
AAPL Annual Balance Sheet - Apple Inc. - Wall Street Journal. (2018). Retrieved from https://quotes.wsj.com/AAPL/financials/annual/balance-sheet
Filbeck, G., & Krueger, T. M. (2005). An analysis of working capital management results across industries. American Journal of Business, 20(2), 11-20.
Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.
Michalski, G. (2008). Operational Risk in Current Assets Investment Decisions: Portfolio Management Approach in Accounts Receivable
Stevenson, W. J., Hojati, M., & Cao, J. (2007). Operations management (Vol. 8). Bo
